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MONEY MANAGER MONITOR
FOR THE WEEK ENDED MAY 11, 2001 ----------------------------------------------------------- THIS WEEK: ***NOTABLE CONTACT MOVEMENTS ***MERGERS & ACQUISITIONS ***NEWS ***KINGDON DECREASES EXPOSURE TO THE ENERGY SECTOR ***HEDGE FUND PROFILE: STARO ASSET MANAGEMENT ***SHAREHOLDER ACTIVISTS UP THEIR DEMANDS ***SECTOR COVERAGE: BOSTON PARTNERS ASSET MANAGEMENT, L.P. ----------------------------------------------------------- NOTABLE CONTACT MOVEMENTS U.S.: *JOHN BALASKAS, formerly a portfolio manager with New York-based hedge fund JLF Asset Management, LLC, left the firm in March 2001. Michael Lippert has taken over his position. *THOMAS BARRETT, formerly a portfolio manager with MFS Investment Management, recently left the firm to join a Boston-based hedge fund. During his tenure at MFS, Barrett co-managed the Massachusetts Investors Growth Stock Fund and Fortis Series Fund- Investors Growth Series. *PAUL J. BERLINGUET, formerly a portfolio manager with Baring Asset Management, left the firm in March 2001. Berlinguet joined John Hancock Financial Services where he co-manages the John Hancock Declaration V.A. Large Cap Growth. At Baring, Berlinguet co-managed the Baring American Smaller Companies Trust and the ING Small Cap Growth Fund. *GARY CAMPBELL, previously chief investment officer at Commerce Bank of St. Louis, recently joined St. Louis, MO-based Kennedy Capital Management as the firm's new chief investment officer. *ADAM EGELBERG, previously a security analyst with Credit Suisse Asset Management, L.L.C., left the firm in mid-April. *JOHN EMRICH joined Bricoleur Capital Management, L.L.C.'s Chicago office in April 2001 as a security analyst. Previously, Emrich served as a research associate at Petros Capital, L.P. *BOB GRANDHI, currently the chief investment officer of Monument Advisors and portfolio manager of the Monument Medical Sciences, Monument Digital Technology and Monument Telecommunications Funds, will be leaving the firm shortly. *SEEMA HINGORANI recently joined Pequot Capital Management as a vice president and manager of the software investment team. Prior to joining Pequot, Hingorani was employed by T. Rowe Price Associates as a media and Internet analyst. *BRYAN KISS, previously a research associate with Cramer Rosenthal McGlynn, LLC, left the firm approximately two weeks ago. *RUDOLPH KLUIBER, formerly a portfolio manager specializing in small-cap value stocks with State Street Research & Management Co., is leaving the firm to launch a hedge fund. During his tenure at State Street, Kluiber managed the State Street Research Aurora Fund (with $989.4 million in equity assets as of September 30, 2000) and Advantus Venture Fund. According to Morningstar, Kluiber is forming his new venture with GREGORY FRASER and TIMOTHY KROCHUK, who recently left Fidelity. John Burbank has been promoted to lead the small-cap value team at State Street. *WestAM (U.S.A.) Ltd. (formerly Gulfstream Global Investors, Ltd.) recently welcomed KIRK LOBB as a portfolio manager covering domestic equities. Previously, Lobb was employed as a security analyst following financials, basic materials, capital goods, and transportation with USAA Investment Management. Additionally, WestAM hired JANGILA HILLAS as a pharmeceuticals analyst and ROBERT PRATHER as a technology analyst. *JAMES B. MOORE, a portfolio manager with PNC Advisors, left the firm in April 2001. He has not yet been replaced. *MICHAEL NANCE re-joined Putnam Investment Management in early May 2001 as a portfolio manager on the domestic core equity team. Previously, he was employed by Kobrick Capital Management, L.P. as a senior vice president and portfolio manager. He joined the firm in June 1999 from Putnam where he managed the Putnam Voyager Fund. Prior to Nance's departure from Kobrick, he managed the Nvest Kobrick Growth Fund and the Nvest Star Advisors Fund. *THOMAS NEUHAUS recently joined Richmond, VA-based SSCM, L.L.C. (formerly Scott & Stringfellow Capital Management) as a portfolio manager and mid-cap analyst. Prior to joining the firm, Neuhaus was the head of technology equity research at BB&T Capital Markets. *ANDREW PANG, formerly a vice president and portfolio manager with Fremont Investment Advisors, Inc., retired in early April. Prior to his retirement, Pang co-managed the Fremont Global Fund. *TERENCE PARE, formerly a security analyst and partner with New York, NY-based hedge fund CBM Capital, Inc., left the firm in April 2001. The firm has not yet hired a replacement. *ROBERT C. PUFF, JR., chief investment officer of American Century Investment Management, will step down from his role on July 1st and will take on the role of chairman of American Century Companies, Inc. RANDALL MERK will succeed Puff as the firm's new CIO. Merk previously served as American Century's fixed income CIO. *LAUREN ROMEO, formerly an analyst (generalist) with Legg Mason Inc., recently left the firm. *ELI T. ULLUM, previously a security analyst following retailing, supermarkets/drugstores, and textiles in the high yield department at Fidelity Management & Research, joined Boston, MA-based Regiment Capital Advisors, Inc. in April 2001 as a fixed income and equity security analyst. *B. RANDALL WATTS recently joined Standish, Ayer & Wood Inc. as head of its small-cap growth group replacing Nicholas Battelle who left the firm last year to join Lee Munder Capital Group. Previously, Watt was employed as a portfolio manager with Boston-based Westfield Capital Management. CANADA: *MARIO JELIC joined AIM Funds Management (Canada) Inc. on May 1, 2001 as an analyst following chemicals, fertilizers, and technology in North America. Previously, Jelic was employed at RBC Dominion Securities as a sell-side security analyst. SELL-SIDE: *KEVIN DYCHES, CFA, formerly a research analyst covering computer & business services with Prudential Securities, recently joined the equity research team in the Leawood, Kansas office of Hoak Breedlove Wesneski & Company. Dyches joins the firm as a senior vice president on the Computer Services & Software Equity Research team. DON MCARTHUR, a former Prudential Securities' computer and business services analyst, has also joined the firm as an assistant vice president and equity research associate. *CHRIS EADES, formerly an analyst following energy exploration and production companies at UBS Warburg, recently left the firm. The coverage of the companies he previously followed were temporarily suspended pending reassignment. DAN HELLBERG, previously a transportation analyst with UBS Warburg, has also decided to leave the firm. The airfreight companies he previously covered will be reassigned to Jamie Baker, while his coverage of rail and logistics companies will be dropped. *JIM IRWIN, formerly the automotive sector analyst with Goldman Sachs & Co. in New York, joined the Government of Singapore Investment Corp. as an automotive analyst. *TODD RETHEMEIER recently joined Bear, Stearns & Co., Inc. as a security analyst. Previously, he was employed as an equity analyst covering wireless telecommunications at J.P. Morgan Securities Inc. ----------------------------------------------------------- MERGERS & ACQUISTIONS *May 11, 2001- American International Group (AIG) announced that it would acquire American General Corporation, parent company of Houston, TX-based American General Investment Management, which managed approximately $12.6 billion in equity assets according to the 13F filed for the quarter ended December 31, 2000. The deal is expected to close by the end of the year. This announcement follows AIG's counteroffer of Prudential Plc's bid to acquire American General in March 2001. *May 7, 2001- Camden National Corporation announced that it would acquire Portland, ME-based Gouws Capital Management, which managed approximately $224.1 million in equity assets according to the 13F filed for the quarter ended December 31, 2000. The deal is expected to close within sixty days. *May 7, 2001- BNP Paribas agreed to acquire the 55% stake in BancWest Corporation that it does not already own. First Hawaiian Bank, a subsidiary of BancWest, managed approximately $747.8 million in equity assets according to the 13F filed for the quarter ended March 31, 2001. ------------------------------------------------------- NEWS *According to a mutual fund filing with the SEC, Monument Funds has entered into a subadvisory agreement with Orbitex Management, Inc. to manage the Monument Digital Technology Fund, Monument Medical Sciences Fund, and Monument Telecommunications Fund. The deal is subject to shareholder approval. This agreement is just one part of a deal between Monument and Orbitex; currently the firms are discussing further alliances as Monument made cutbacks to its workforce. Reportedly, BOB GRANDHI, currently the chief investment officer of Monument Advisors, will be leaving the firm shortly. *The Threshold Advisor Small-Cap Value Fund and Threshold Advisor Mid-Cap Fund were liquidated on May 7, 2001. The funds were previously managed by St. Louis, MO-based Kennedy Capital Management. *The board of directors of the Strong Internet and the Strong Technology 100 Funds' approved the reorganization of the Strong Internet Fund into the Strong Technology 100 Fund. Shareholders are expected to vote on the merger on July 20, 2001. *On May 1, 2001, RS Investment Management changed its name to RS Investments. *On May 1, 2001, the Nvest family of funds was changed to the CDC Nvest family of funds as a result of the October 2000 acquisition of Nvest by CDC. ------------------------------------------------------ KINGDON DECREASES EXPOSURE TO THE ENERGY SECTOR According to its 13F for the first quarter of 2001, Kingdon Capital Management reported approximately $1.6 billion in equity assets invested in a portfolio of 144 companies. This is a slight decrease from the previous quarter, in which the firm reported $1.9 billion in equity assets invested in a portfolio of 167 companies. Top five holdings for the quarter ended March 31, 2001, included: Arbitron Inc. [ARB] with 1,090,000 shares valued at $100.8 million; Philip Morris Cos. Inc. [MO] with 1,250,000 shares valued at $59.3 million; Goldman Sachs Group Inc. [GS] with 500,000 shares valued at $42.5 million; Waste Management Inc. [WMI] with 1,700,000 shares valued at $42.0 million; and, Orion Power Holdings Inc. [ORN] with 1,150,000 shares valued at $35.3 million. The firm's holding in Arbitron represents the largest new position this quarter. Other new positions for the firm include: Lehman Brothers Holdings Inc. [LEH] with 450,000 shares valued at $28.2 million; Tosco Corp. [TOS] with 600,000 shares valued at $25.7 million; Amgen Inc. [AMGN] with 367,400 shares valued at $22.1 million; and, General Motors Corp. [GM] with 400,000 shares valued at $20.7 million. Despite a quarter in which the tech-heavy Nasdaq's plunge seemed never-ending, the firm remained heavily weighted in the sector, increasing its tech holdings slightly from approximately 20.5% in the fourth quarter of 2000 to 21.7% in the first quarter of 2001. Perhaps, the biggest change to the firm's portfolio was found in its energy sector holdings. In the fourth quarter of 2001, approximately 9.3% (valued at $172.5 million) of the firm's portfolio was invested in energy companies compared to the first quarter of 2001 in which the firm sold approximately three times as much than it bought. As of March 31, 2001, Kingdon's energy holdings dropped to 3.3% of the portfolio with a value of $50.7 million. The biggest increases were felt in the consumer cyclicals sector, which represented 10.6% of the firm's portfolio for a value of $196.7 million at the end of 2000. As of March 31, 2001, the firm's holdings in the consumer cyclicals sector increased to 17.4% of the portfolio for a value of $271.4 million. This increase was led by purchases in General Motors, Ford Motor Co. [F] with 700,000 shares valued at $19.7 million; Abercrombie & Fitch Co. [ANF] with 500,000 shares valued at $16.4 million; and, Galileo International Inc. [GLC] with 724,100 shares valued at $15.9 million. ---------------------------------------------------------- HEDGE FUND PROFILE: STARO ASSET MANAGEMENT BRIAN STARK and MICHAEL ROTH met years ago at the prestigious Harvard Law School. While both may have intended to pursue very successful careers in law, they found their success in a very different area. After graduation, the duo parted ways; Stark moved to Denver where he handled general commercial litigation, antitrust law and intellectual property cases. Roth, on the other hand, moved to Washington, D.C. where he handled bankruptcy cases. It wouldn't be long before Stark would take what was once a hobby and turn in into his profession. Investing had always been of great interest to Stark. According to an article written by the Business Journal- Milwaukee, while Stark attended law school he researched and wrote a book on complex investment strategies like hedging, arbitrage and liquidation. This book was a culmination of his interest in investing which began at a very early age. With the knowledge Stark accumulated over the years in the research and writing of his book and managing his own money, Stark took this experience and decided to apply it to his own investment partnership. Founded in 1987, Staro Asset Management originally opened in New York and later moved to Mequon, WI in 1993. The firm manages the Shepherd Investments International, Ltd., Stark Global Fund, Ltd., Stark Europe Fund, Ltd. and the Stark Investments, L.P. hedge funds. The firm expanded its investment prowess when it launched BayStar Management, which manages the Baystar Capital LP hedge fund. Stark and Roth are joined in the venture by STEVE LAMAR and LARRY GOLDFARB. According to MAR/Hedge, the fund invests in public companies through the purchase of individually-negotiated, privately-placed securities, relying heavily on investing in convertible securities. Staro Asset Management uses a combination of top-down and bottom-up analysis. In the top-down approach, the firm uses proprietary qualitative models to screen a global universe of convertible and risk arbitrage opportunities. The quantitative screens evaluate a convertible's fair value, attractiveness from a historical perspective, and expected return. Qualitative factors considered include the fundamentals of the underlying common stock, short-term supply and demand forces affecting either the common stock or the convertible security, and default risk. The firm then relies on its vast experience and expertise to decide which of the uncovered opportunities are real and which are merely apparent. The firm will purchase or short sell a convertible bond, convertible preferred stock, warrant or option, coupled with the respective short sale or purchase of the underlying security of which the convertible can be exchanged. Through out all of the firm's affiliated funds there are no restrictions or limitations on what sector, market-cap, or country the firm can invest in, thought it concentrates on the G-7 markets. It uses the same screening and selection process in the bottom-up approach applied in uncovering optimal risk-adjusted opportunities. The firm's primary objective is to achieve an uncorrelated, absolute return of 15% to 20%, net of fees. The primary strategy of the firm is convertible hedging, which typically represents 70% to 90% of overall investing. Other strategies are used on an opportunistic basis and will differ per fund. In its convertible hedging strategy, the firm will take advantage of temporary mispricings between related securities to create positions that generate significant streams of cash flow. The firm finds the most attractively priced convertible products in out-of-favor sectors. In a shareholder letter dated May 4, 2001, the firm detailed its outlook on the global market, stating, "We have continued to decrease our exposure to merger arbitrage and re-deploy the capital into other arbitrage strategies that currently offer much more attractive risk/return profiles." The letter goes on to state that, "In convertible arbitrage, potential opportunities in the near term are abundant." According to HedgeWorld, Staro Asset Management has approximately $1.5 billion in assets under management. ---------------------------------------------------------------------------- -------------- SHAREHOLDER ACTIVISTS UP THEIR DEMANDS Many activist funds have continued to grow as a depressed stock market has left many smaller cap companies with decreasing stock prices, making them prime targets for corporate raiders and management shake-ups. Many firms are reluctant to become too active, instead trying to keep a low profile and involving themselves when they believe their interest is not being adequately represented. Recently, Harvard Management Company entered the fray when a company it was involved in received a tender offer. While the firm felt the tender offer fell short of the company's true value, it had to take it, unable to persuade other shareholders of its position. Many socially responsibly funds have also increasingly used proxy statements to push their own agendas. BP Amoco Plc - ADR [BP] recently faced a shareholder proxy that would have forced the company to phase out its production of oil and gas and instead focus on more environmentally friendly means of energy production. The measure failed, but had a good deal of support from some pension funds and other institutional managers that have had a record of support for environmental causes. In a 13G filed in late October 2000, notable financier Carl C. Icahn declared a 9.9% stake in VISX, Inc. [EYE]. However, Icahn recently failed in his bid to oust the board of the eye surgery equipment maker. Icahn had repeatedly railed again VISX's management, hoping to elect his own nominees to the company's board. Memphis, TN-based Southeastern Asset Management, Inc. has made sizable gains through its activist $3.4 billion Longleaf Partners Fund. The fund was up 20.6% in an otherwise brutal 2000, and it was up 5.3% through April 30, 2001 according to Morningstar. The fund is a traditional GARP investor, which also takes into account, the underlying value of a company in the event of a turnaround, or outright sale. Stocks are purchased on current and projected free cash flow, or cash profits minus expenditures necessary to run the business. When evaluating pricing, the firm determines a company's liquidation value, or the sum of what a company's pieces would sell for on the open market. From January 6 to March 2, 2000, Southeastern Asset Management acquired approximately 8.47 million shares of Aetna, Inc. [AET] according to a 13D filing with the SEC dated March 8, 2000. That gave Southeastern a 6.0% share in the Hartford, CT-based insurer. Aetna had been battered in the market and many shareholders wanted to see the company spin off its less profitable businesses. In that filing, Southeastern announced its interaction with other parties to determine the best way to increase Aetna's true economic value. About 1.77 million of the shares purchased were for Southeastern's Longleaf Partners Fund. "In this situation," the filing reported "Southeastern has had conversations with third parties, and intends to have additional conversations with these and one or more other third parties and/or the Issuer's management, regarding actions or transactions." Southeastern typically works closely with management to determine the best way to increase shareholder value. Aetna had received a joint bid from Dutch financial company ING Group NV and WellPoint Health Networks. ING was interested in Aetna's financial services while WellPoint was interested in Aetna's U.S. HealthCare wing. Southeastern's efforts were foiled, however, when Aetna sold off it's financial services arm, while holding on to its health care operations. Since then, Longleaf has slightly eased off on its stake, but still kept the majority of its holding. Top five holdings for the Longleaf Partners Fund as of March 31, 2001 included: Marriott International Inc. New [MAR] with 9,966,000 shares (valued at $410.4 million); Waste Management Inc. Del [WMI] with 15,096,300 shares (valued at $372.9 million); General Motors Corp. [GM] with 5,000,000 shares (valued at $259.3 million); FedEx Corp. [FDX] with 5,615,000 shares (valued at $234.0 million); and, Tricon Global Restaurants Inc. [YUM] with 5,615,000 shares (valued at $217.3 million). Other funds have also adopted more intrusive activist programs. The California Public Employees' Retirement System (CalPERS) believes that good corporate governance means the difference between short-term setback and long-term financial difficulty. CalPERS spent many years simply reacting to situations, such as takeovers. The firm has since taken a more proactive approach to investments in adopting its Corporate Governance Core Principles and Guidelines to achieve this end. The firm believes that some measure must be taken to achieve long-term profitability, but that some investors may not be willing to wait out short-term difficulties. The guidelines, however, are not absolute. CalPERS readily realizes that some firm's are constrained by competitive pressures, as well as a myriad of other factors. The firm likes to see independent board members, and an open, shareholder friendly environment. This typically means the banning of greenmail and an accessible CEO who is free of additional constraints and is capable of acting in the best interests of shareholders. Most important, in their evaluation, is the appearance of an independent board of directors. Hedge fund Wynnefield Capital Management L.L.C. has also recently entered the fray. The firm's Wynnefield Partners Small Cap Value L.P. recently submitted a shareholder proposal to the board of directors at Airgas, Inc. [ARG]. The firm is pushing for the company to sell itself or to seek out new strategic partnerships. The measure will go before shareholders at the firm's annual meeting in August 2001. Wynnefield's top five holdings for the quarter ended March 31, 2001 included: Sylvan Inc. [SYLN] with 1,068,886 shares (valued at $13.4 million); Pricesmart Inc. [PSMT] with 310,000 shares (valued at $12.1 million); First Aviation Services Inc. [FAVS] with 2,066,892 shares (valued at $10.1 million); Delta & Pine Land Co. [DLP] with 275,500 shares (valued at $6.6 million); and, CTB International Corp. [CTBC] with 723,500 shares (valued at $6.3 million). Many companies' boards of directors are under increasing outside pressure. Growing demands on management from shareholders is increasingly an inevitable part of the future. ------------------------------------------------------ SECTOR COVERAGE: BOSTON PARTNERS ASSET MANAGEMENT, L.P. The firm recently welcomed three new analysts to its team, including: NEIL DEVLIN, MELISSA FREEMAN, and LOUIE TOMA. These additions have initiated several changes among the firm's research coverage. LAWRENCE CHEN and DUILIO RAMALLO dropped the coverage of software and picked up the coverage of tobacco; ERIC CONNERLY picked up the coverage of banks and transportation; and, OONA ELLIOT picked up the coverage of leisure and aerospace/defense. CHRISTIAN MCCALL picked up the coverage of environmental controls, and DAVID PYLE dropped the coverage of automobiles and picked up the coverage of paper & forest products, steel, and metals/mining. TOBIAS WELO dropped the coverage of autos and gaming/leisure and picked up the coverage of publishing, building, construction and conglomerates. Current sector coverage is as follows: *LAWRENCE CHEN and DUILIO RAMALLO, CPA, CFA: telecommunications, technology, and tobacco *ERIC CONNERLY, CFA: energy, thrifts & agencies, banks, and transportation *NEIL DEVLIN, CFA and DAVID PYLE, CFA: insurance, paper & forest products, steel, and metals/mining *OONA ELLIOTT: retail, technology, apparel, consumer products, leisure, and aerospace/defense *MELISSA FREEMAN: financial services, energy, and transportation *SEAN GAVIN: small- and mid-cap generalist *GEORGE GUMPERT: small-cap generalist *MARTIN MACDONNELL, CFA: quantitative strategies *CHRISTIAN MCCALL: health care, environmental control, chemicals, and REITs *MAGGY PIETROPAOLO, CFA: quantitative strategies *LOUIE TOMA, CPA, CFA: long/short equity generalist *TOBIAS WELO: capital goods, publishing, building, construction, media, and conglomerates *SO YI: quantitative strategies ------------------------------------------------------- NOTE: Positions reported are derived from 13F filings, which do not include cash figures, and may not be representative of a firm's equity assets as of March 31, 2001. In addition, if a firm is hedged with many short positions, when reversed they may appear as net purchases. ----------------------------------------------------------- Questions, comments or if you would like the MMM staff to investigate any news heard on the Street, please send inquiries to staff@news.moneymanagermonitor.com, or call (212) 510-9263. -------------------------------------------------- ?Money Manager Monitor. 2001. Although no assurance can be given for its accuracy, the information contained in this report was obtained from sources considered reliable. Except for making one printed copy of this document, published by The Money Manager Monitor, it may not be reproduced, republished, broadcast or otherwise distributed without prior written permission from The Money Manager Monitor. --- You are currently subscribed to carson_mmm as: jwillia@enron.com To unsubscribe send a blank email to leave-carson_mmm-151245F@news.carsongroup.com
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